Fed withdraws 2023 crypto guidance, opens path for innovation
The Federal Reserve has withdrawn a 2023 policy statement that constrained how Fed‑supervised banks, including uninsured institutions, could engage with crypto-related activities, marking a continued shift by U.S. regulators toward digital assets.
The 2023 guidance applied the same standards to uninsured banks as to federally insured institutions, asserting that similar activities carry similar risks and should be regulated uniformly. The approach prevented uninsured banks from conducting activities not permitted for national banks—such as offering crypto services—which in turn barred them from Fed membership if their primary activities were not allowed.
Fed cites evolving financial system since 2023
The Fed said it withdrew the guidance because it was outdated and that “the financial system and the Board’s understanding of innovative products and services have evolved.” “As a result, the 2023 policy statement is no longer appropriate and has been withdrawn,” it stated.
Caitlin Long, CEO of crypto‑focused Custodia Bank, welcomed the move in a post on X on Wednesday, noting the 2023 guidance was cited as a reason for the prior denial of her institution’s master account application.
Source: Caitlin Long
A master account at the Fed allows a financial institution to hold balances directly with the U.S. central bank and access its core payment systems, enabling settlement in central bank money without relying on a correspondent bank.
“The Fed broke the law by citing this very guidance in the Custodia denial, even tho the guidance hadn’t become official yet, that didn’t happen until Feb 2023,” Long said. “But most of that team is now gone or out of power at the Fed. Nature is healing. Thank you VCS Bowman & Gov Waller!”
New framework aims to support bank innovation
On Wednesday, the Federal Reserve also issued new guidance establishing a formal pathway for both insured and uninsured Federal Reserve‑supervised state member banks to pursue “innovative activities,” including cryptocurrencies, provided they meet risk‑management expectations, according to a Fed statement.
Fed Vice Chair for Supervision Michelle Bowman said that by “creating a pathway for responsible, innovative products and services, the Board is helping ensure that the banking sector remains safe and sound while also modern, efficient, and effective.”
Decision not unanimous
Fed Governor Michael Barr dissented, arguing that equal treatment across banks preserves a level playing field and prevents regulatory arbitrage. “This principle continues to hold true today. Therefore, I cannot agree to rescind the current policy statement and adopt a new one that would, in effect, encourage regulatory arbitrage, undermine a level playing field, and promote incentives misaligned with maintaining financial stability. I dissent,” he said.
Barr has been accused by some industry participants of ties to “Operation Chokepoint 2.0,” an alleged federal effort to limit crypto firms’ access to banking services. He previously served as an adviser at Ripple and has advocated for responsible stablecoin regulation.
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